South Korean stocks ended 0.23 percent lower on Monday as investors stepped to the sidelines due to prolonged currency volatility in the foreign exchange market, analysts said Monday. The local currency surged against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) dipped 4.58 points to 1,953.21. Trading volume was moderate at 339.7 million shares worth 3.49 trillion won (US$3.22 billion), with decliners outpacing gainers 475 to 337.

"Despite positive economic indicators from the U.S. and China, the local stock market remained stagnant due to the appreciation of the won against the Japanese yen," said Lee Young-won, an analyst at HMC Investment Securities Co.

"For the time being, there are few market factors that can stabilize the currency volatility," Lee added. A stronger won inflicts foreign exchange losses on exporters, making South Korean goods more expensive overseas.

Foreigners purchased a net 59.1 billion won worth of local shares, and retail investors also scooped up a net 15.4 billion won. On the other hand, institutional investors dumped a net 74.2 billion won.

Carmakers finished lower as foreign investors offloaded their shares, with industry leader Hyundai Motor falling 1.45 percent to 203,500 won, and Kia Motor losing 2.5 percent to 50,700 won.

Korean Air Lines, South Korea's top air carrier, moved down 0.45 percent to 44,450 won despite its improved earnings outlook for 2013.

Hanwha General Insurance shed 1.5 percent to 5,900 won as the firm reported an operating loss in December last year.

In contrast, satellite broadcasting channel operator KT Skylife moved up 4.07 percent to 34,500 won as the number of subscribers is expected to increase in 2013.

Defense shares gathered ground on hopes they would benefit from the heightened tension with North Korea, with Huneed Technologies soaring 11.58 percent to 4,675 won.

Mobile carriers also increased, with leading SK Telecom adding 1.47 percent to 172,500 won and No. 2 player KT moving up 3.1 percent to 38,300 won. No. 3 player LG Uplus climbed 5.13 percent to 8,610 won.

The local currency closed at 1,084.60 won against the greenback, up 12.80 won from Friday's close, following the better-than-expected economic data from the U.S., dealers said. (Yonhap News)